COLLEGE SAVINGS 101

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Summarizes and compares the features of 529 plans, 529 ABLE plans, ESAs, UTMAs, IRAs, and education savings bonds.

YEAR 2024 RULES529 PlanCoverdell Education Savings AccountsUGMA/UTMA
Federal Income TaxNon-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expensesNon-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expenses and qualified K-12 expenses also excludedEarnings and gains taxed to minor; first $1,100 of unearned income is tax exempt; unearned income over $2,200 for certain children under age 24 is taxed at rates for estates and trusts
Federal Gift Tax TreatmentContributions treated as completed gifts; apply $17,000 annual exclusion, or up to $85,000 with 5-year electionContributions treated as completed gifts; apply $17,000 annual exclusionTransfers treated as completed gift; apply $17,000 annual gift exclusion
Federal Estate Tax TreatmentValue removed from donor's gross estate; partial inclusion for death during a 5-year election periodValue removed from donor's gross estateValue removed from donor's gross estate unless donor remains as custodian
Maximum InvestmentEstablished by the program; many in excess of $400,000 per beneficiary$2,000 per beneficiary per year combined from all sourcesNo limit
Qualified ExpensesCollege tuition, fees, books, computers and related equipment, supplies, special needs; room and board for minimum half-time students. Up to $10,000 in tuition expenses for K-12 schools. Up to $10,000 in student loan repayment.Tuition, fees, books, supplies, equipment, special needs; room & board for min. half- time students; additional types of K-12 expensesCollege tuition, fees, books, computers and related equipment, supplies, special needs; room and board for minimum half-time students. Up to $10,000 in tuition expenses for K-12 schools. Up to $10,000 in student loan repayment.
Able to Change BeneficiaryYes, to another member of the beneficiary's familyYes, to another member of the beneficiary's familyNo; represents an irrevocable gift to the child
Time/Age RestrictionsNone unless imposed by the programContributions before beneficiary reaches age 18; use of account by age 30Custodianship terminates when minor reaches age established under state law (generally 18 or 21)
Income RestrictionsNoneContributions phase out for incomes between $190,000 and $220,000 (joint filers) or $95,000 and $110,000 (single filers). No annual inflation adjustmentNone
Federal Financial AidCounted as asset of parent if owner is parent or dependent studentCounted as asset of parent if owner is parent or dependent studentCounted as student's asset
InvestmentsMenu of investment strategies as developed by the programBroad range of securities and certain other investmentsAs permitted under state laws
Use for Nonqualifying ExpensesWithdrawn earnings subject to federal tax and 10% penaltyWithdrawn earnings subject to federal tax and 10% penaltyFunds must be used for benefit of the minor
 

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